| Elahi Cotton Mills Limited |
|
|
|
|
|
|
|
|
|
|
| Annual
Report 1999 |
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|
|
| COMPANY'S
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
|
| MAHBOOB
ELAHI |
|
| MAHFOOZ
ELAHI |
|
| MAHMOOD
ELAHI |
|
| ABDUL
RASHEED |
|
| TARIQ
SAYEED |
|
| FARRUKH
AHMED |
|
| SHAHID
ANWAR |
|
|
| CHIEF
EXECUTIVE |
|
|
| MAHBOOB
ELAHI |
|
|
| AUDITORS |
|
|
| M/S.
S. M. MASOOD & CO. |
|
| CHARTERED
ACCOUNTANTS |
|
| 23
EAST, SAEED PLAZA, |
|
| BLUE
AREA, |
|
| ISLAMABAD. |
|
|
| REGISTERED
OFFICE |
|
|
| 270-SECTOR
I-9, |
|
| INDUSTRIAL
AREA, |
|
| ISLAMABAD. |
|
|
| MILLS |
|
|
| JURIAN,
MANDRA, |
|
| TEHSIL
GUJAR KHAN, |
|
| DISTRICT
RAWALPINDI |
|
|
|
| DIRECTORS
REPORT TO THE MEMBERS |
|
|
| The
Directors of the Company are pleased to welcome you to the 29th Annual
General Meeting of |
|
| your
company and feel pleasure in presenting their Annual Report alongwith audited
financial |
|
| statements
for the year ended September 30, 1999. |
|
|
| The
year under report was the very worst year for the Company. The Company has
sustained |
|
| operational
loss of Rs. 21.051 million as against loss of Rs. 13.033 million in the last
year. The |
|
| financial
results of the company for the year under review are given below :- |
|
|
|
RUPEES |
|
|
IN MILLION |
|
|
| Operating
Profit/Loss) |
|
(21.051) |
|
| Add.
Financial Charges |
|
(18.360) |
|
| Other
Income |
|
5.298 |
|
|
---------- |
|
| Loss
before Taxation |
|
(34.113) |
|
| Add:
Provision for Taxation |
|
(0.347) |
|
|
---------- |
|
| Net
Loss after Taxation |
|
(34,460) |
|
| Accumulated
Loss brought forward |
|
(50.757) |
|
|
---------- |
|
| Accumulated
Loss carried forward |
|
(85.217) |
|
|
========== |
|
|
|
|
| The
financial results are unfavourable as the Textile Industry has been in
serious crises for the last |
|
| seven
years. Due to the effect of the crises our unit could not be operated 100 %
for the year under |
|
| review. |
|
|
| Main
reason and factors that governed the negative results for the year are
summarised below :- |
|
|
| The
severe textile recession contained in international and domestic markets due
to which |
|
| the
prices of yarn were not favourable. |
|
|
| Labour
Management problem |
|
|
| Heavy
financial burden due to higher mark up rates |
|
|
| Increase
in production cost specially in power tariff rates, stores and spares etc. |
|
|
| AUDITORS |
|
|
| The
auditor M/S. S.M. Masood & Company, Chartered Accountants, retire and
being eligible offer |
|
| themselves
for re-appointment. |
|
|
| YEAR
2000 COMPUTER COMPLIANCE: |
|
|
| The
Company had made necessary changes in its computer software and hardware.
Hence our |
|
| business
activities remained normal at the commencement of new millennium. |
|
|
| SHAREHOLDING |
|
|
| A
statement showing the pattern of share holding by the shareholders of the
Company as on |
|
| September
30, 1999 is attached herewith. |
|
|
| FUTURE
PROSPECTS AND OUTLOOK |
|
|
| At
present Textile Industry in Pakistan is moving towards improvement as some of
the bold steps |
|
| were
taken by the Government. It is hoped that next year would be better for
Spinning Sector and we |
|
| will
try to recoup part of our losses accumulated so far. |
|
|
| The
overall Labour management relations remained pleasant. However for some
period the |
|
| behaviour
of the Labour was uncordial due to un co-operative attitude of the Labour
leaders. |
|
|
| I,
together with my fellow Directors hope that co-operative attitude of the
Labour will continue in |
|
| performing
their duties efficiently. |
|
|
| The
Directors have to comment on Auditors qualification as under: |
|
|
| The
company incurred loss of Rs. 34.460 million due to shortage of working
capital, severe textile |
|
| crises,
Labour management problems and heavy financial burden. Due to above factors
the |
|
| company
operated partially and suffered heavy losses. However, presently the company
moving |
|
| towards
improvement and it is hoped that the company will recoup part of losses
accumulated |
|
| and
will continue its operations. The company has also approached various DFI's
for financing |
|
| B.M.R.
plan for revival of the unit, which will improve the profitability of the
Company. |
|
|
| As
regard the opinion of our Auditors in connection with the investment in the
associated |
|
| undertakings,
the company has made investment in associated undertakings above the Bank |
|
| rate
as required under Companies Ordinance, 1984. However, the company is expected
to |
|
| recover
the amount from associated undertaking and fulfil the requirement of Section
208 of the |
|
| Companies
Ordinance, 1984. |
|
|
|
BY ORDER OF THE BOARD |
|
| Islamabad, |
|
| March
07, 2000. |
|
|
|
( MAHBOOB ELAHI ) |
|
|
Chief Executive |
|
|
|
| AUDITORS'
REPORT TO THE MEMBERS |
|
|
| We
have audited the annexed balance sheet of ELAHI COTTON MILLS LIMITED, |
|
| as
at September 30,1999 and the related profit and loss account and the cash |
|
| flew
statement, together with the notes forming part thereof, for the year then
ended |
|
| and
we state that; |
|
|
| The
Company has suffered net loss of Rupees 34.460 million for the year ended |
|
| September
30, 1999 and has accumulated loss of Rupees 85.217 million. |
|
| Current
liabilities exceeded its current assets by Rupees 12.608 million and |
|
| total
liabilities exceeded its total assets by Rupees 39 million. The company is |
|
| also
facing difficulties in meeting its financial obligations. Due to these
factors |
|
| the
company may be unable to continue as going concern. These accounts |
|
| have
been prepared on the going concern assumption. |
|
|
| Considering
significance of the above matter, we are unable to form an opinion |
|
| on
the validity of the use of going concern assumption. Consequently |
|
| adjustments
may be required to the recorded assets and classification of |
|
| liabilities. |
|
|
| As
referred to in note 18 to the accounts aggregate investment in associated |
|
| companies
exceeds thirty percent of the paid up capital plus free reserves of the |
|
| company
which in contravention with the requirements of section 208 of the |
|
| Companies
Ordinance, 1984. |
|
|
| Except
for the effect of adjustments, if any, as might have been determined to be |
|
| necessary,
had we been able to satisfy ourselves as to the matter set out above, we
report |
|
| that
we have obtained all the information and explanations which to the best of
our |
|
| knowledge
and belief were necessary for the purposes of our audit and, after due |
|
| verification
thereof, we report that: |
|
|
| a)
in our opinion, proper books of account have been kept by the |
|
| company
as required by the Companies Ordinance, 1984; |
|
|
| b)
in our opinion: |
|
|
| i)
the balance sheet and profit and loss account together with the notes |
|
| thereon
have been drawn up in conformity with the Companies |
|
| Ordinance,
1984, and are in agreement with the books of account |
|
| and
are further in accordance with accounting policies consistently |
|
| applied; |
|
|
| ii)
the expenditure incurred during 'the year was for the purpose of the |
|
| company's
business; and |
|
|
| the
business conducted, investments made and the expenditure |
|
| incurred
during the year were in accordance with the objects of the |
|
| company; |
|
|
| c)
in our opinion and to the best of our information and according to the |
|
| explanations
given to us, the balance sheet, profit and loss account and |
|
| cash
flow statement, together with the notes forming part thereof, give the |
|
| information
required by the Companies Ordinance, 1984, in the manner so |
|
| required
and respectively give a true and fair view of the state of the |
|
| company's
affairs as at September 30, 1999, and of the loss and cash flow |
|
| for
the year then ended; and |
|
|
| d)
in our opinion Zakat deductible at source under the Zakat and Ushr |
|
| Ordinance,
1980, was deducted but not deposited in the Central Zakat |
|
| Fund
established under section 7 of that Ordinance. |
|
|
| ISLAMABAD |
|
S.M. MASOOD & COMPANY |
|
| March
05, 2000. |
|
Chartered Accountants |
|
|
|
|
| BALANCE
SHEET AS AT 30TH SEPTEMBER, 1999 |
|
|
|
|
1999 |
1998 |
|
| CAPITAL
& LIABILITIES |
|
NOTE |
RUPEES |
RUPEES |
|
|
| SHARE
CAPITAL |
|
| Authorised |
|
| 5,000,000
ordinary shares of Rs. 10/- each |
|
50,000,000 |
50,000,000 |
|
|
========== |
========== |
|
| ISSUED,
SUBSCRIBED & PAID UP |
|
| 1,300,000
ordinary shares of Rs. 10/- each |
|
| fully
paid in cash |
|
13,000,000 |
13,000,000 |
|
|
|
|
| ACCUMULATED
LOSS |
|
(85,217,303) |
(50,757,210) |
|
|
----------- |
----------- |
|
| REVALUATION
RESERVE |
|
3 |
33,215,659 |
33,215,659 |
|
|
|
|
----------- |
----------- |
|
|
(39,001,644) |
(4,541,551) |
|
|
| LONG
TERM & DEFERRED LIABILITIES |
|
| Long
Term Finances -Secured |
|
4 |
93,507,604 |
18,958,335 |
|
| Obligation
Under Finance Lease |
|
5 |
2,145,789 |
2,510,915 |
|
| Provision
for gratuity |
|
6 |
2,400,361 |
2,424,190 |
|
|
|
----------- |
----------- |
|
|
|
98,053,754 |
23,893,440 |
|
| CURRENT
LIABILITIES |
|
|
|
| Short
Term Running Finances - Secured |
|
7 |
4,569,801 |
73,100,619 |
|
| Current
Maturity of Long Term Liabilities |
|
8 |
22,427,261 |
15,792,230 |
|
| Due
to Director |
|
|
4,638,575 |
3,112,226 |
|
| Creditors,
Accrued & Other Liabilities |
|
9 |
54,103,352 |
41,002,502 |
|
| Provision
for Taxation |
|
10 |
5,232,077 |
5,072,038 |
|
|
|
----------- |
----------- |
|
|
|
90,971,066 |
138,079,615 |
|
|
|
|
| CONTINGENCIES
& COMMITMENTS |
|
11 |
-- |
-- |
|
|
----------- |
----------- |
|
|
150,023,176 |
157,431,504 |
|
|
========== |
========== |
|
|
|
|
| PROPERTY
& ASSETS |
|
|
|
| TANGIBLE
FIXED ASSETS |
|
|
| Operating
assets (at cost less depreciation) |
12 |
71,119,009 |
75,932,633 |
|
| Fixed
assets in Bangladesh |
|
13 |
-- |
1,334,214 |
|
|
|
|
|
| Capital
work in progress |
|
14 |
474,884 |
463,435 |
|
|
|
|
|
| LONG
TERM INVESTMENT |
|
15 |
25,000 |
25,000 |
|
|
|
|
|
| LONG
TERM SECURITY DEPOSITS |
|
41,656 |
41,656 |
|
|
|
| CURRENT
ASSETS |
|
|
| Stores,
spares & loose tools |
|
16 |
1,776,327 |
3,935,944 |
|
| Stock
in Trade |
|
17 |
37,684,116 |
24,432,745 |
|
| Trade
debtors - unsecured considered goods |
|
230,904 |
3,838,740 |
|
| Due
from associated undertakings/directors |
18 |
27,614,230 |
23,277,934 |
|
| Advances,
deposits, prepayments & other receivables |
19 |
10,908,199 |
23,258,769 |
|
| Cash
and bank balances |
|
20 |
148,851 |
890,434 |
|
|
|
----------- |
----------- |
|
|
78,362,627 |
79,634,566 |
|
|
----------- |
----------- |
|
|
150,023,176 |
157,431,504 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| PROFIT
& LOSS ACCOUNT FOR THE YEAR ENDED |
|
| SEPTEMBER
30, 1999. |
|
|
|
|
1999 |
1998 |
|
|
NOTE |
RUPEES |
RUPEES |
|
|
| Sales (Net) |
|
21 |
64,203,276 |
135,327,283 |
|
| Cost of Sales |
|
22 |
79,825,826 |
139,786,176 |
|
|
|
------------ |
------------ |
|
| Gross loss |
|
(15,622,550) |
(4,458,893) |
|
| OPERATING
EXPENSES |
|
|
| Administrative |
|
23 |
4,845,150 |
4,868.58 |
|
| Selling
& Distribution |
|
24 |
583,216 |
3,705,917 |
|
|
|
------------ |
------------ |
|
|
|
5,428,366 |
8,574,498 |
|
|
|
------------ |
------------ |
|
| Operating
loss |
|
|
(21,050,916) |
(13,033,391 ) |
|
| Other
Income |
|
25 |
5,298,113 |
2,525,648 |
|
|
|
------------ |
------------ |
|
|
|
15,752,803) |
(10,507,743) |
|
| Financial
Charges |
|
26 |
18,359,783 |
17,967,468 |
|
|
|
------------ |
------------ |
|
| NET
LOSS BEFORE TAXATION |
|
(34,112,586) |
(28,475,211 ) |
|
|
|
|
| PROVISION
FOR TAXATION - Current |
|
347,507 |
676,637 |
|
|
|
------------ |
------------ |
|
| NET
LOSS AFTER TAXATION |
|
(34,460,093) |
(29,151,848) |
|
|
| BALANCE
BROUGHT FORWARD |
|
(50,757,210) |
(21,605,362) |
|
|
------------ |
------------ |
|
| BALANCE
CARRIED FORWARD |
|
(85,217,303) |
(50,757,210) |
|
|
========== |
========== |
|
| LOSS
PER SHARE |
|
27 |
(26.51) |
(22.42) |
|
|
| AUDITORS
REPORT TO THE MEMBERS IS ANNEXED. |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
|
Chief Executive |
|
Director |
|
|
|
| CASH
FLOW STATEMENT |
|
| FOR
THE YEAR ENDED SEPTEMBER 30, 1999. |
|
|
|
NOTE |
1999 |
1998 |
|
|
|
RUPEES |
RUPEES |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
| Net
(Loss) before Taxation |
|
(34,112,586) |
(28,475,211) |
|
| Adjustment
for |
|
|
|
| Depreciation |
|
5,056,100 |
5,684,012 |
|
| Financial
charges |
|
18,359,783 |
17,967,468 |
|
| Provision
for gratuity - Net |
|
(23,829) |
(53,934) |
|
| Fixed
assets in Bangladesh |
|
1,334,214 |
-- |
|
| Gain
on sale of fixed assets |
|
(162,085) |
-- |
|
|
----------- |
----------- |
|
| LOSS
BEFORE WORKING CAPITAL CHANGES |
|
(9,548,403) |
(4,877,665) |
|
|
| Changes
in working capital: |
|
|
| Increase
in inventories |
|
(11,091,754) |
14,518,352 |
|
| Decrease
in Trade debtors |
|
3,607,837 |
3,746,330 |
|
| Decrease
in advances, deposits, prepayments and |
|
| other
receivable |
|
12,350,570 |
(4,430,624) |
|
| Decrease
in short term finances |
|
68,530,818) |
(9,164,205) |
|
| Increase
in creditors, accrued and ,.other liabilities |
|
13,797,307 |
18,427,824 |
|
|
---------- |
---------- |
|
| Cash
generated from operations |
|
(49,866,858) |
23,097,677 |
|
|
---------- |
---------- |
|
| Financial
charges paid |
|
(19,056,239) |
(15,571,614) |
|
| Income
Tax paid |
|
(187,470) |
(1,844,964) |
|
|
---------- |
---------- |
|
|
(69,110,567) |
5,681,099 |
|
|
---------- |
---------- |
|
| Net
cash from operating activities |
|
(78,658,970) |
803,434 |
|
|
---------- |
---------- |
|
| CASH
FLOW FROM INVESTING ACTIVITIES: |
|
| Purchase
of fixed assets |
|
(305,391) |
(10,647,622) |
|
| Disposal
of fixed assets |
|
225,000 |
-- |
|
| Capital
work in progress |
|
(11,449) |
(193,506) |
|
|
---------- |
---------- |
|
| Net
cash flow from investing activities |
|
(91,840) |
(10,841,128 |
|
|
---------- |
---------- |
|
| CASH
FLOW FROM FINANCING ACTIVITIES : |
|
|
| Long
term financing (Net) |
|
82,000,000 |
24,644,349 |
|
| Obligation
under finance lease |
|
(1,180,826) |
(2,223,690 |
|
| Associated
undertakings / Directors |
|
(2,809,947) |
(12,654,875 |
|
|
---------- |
---------- |
|
| Net
cash flow from Financing activities |
|
78,009,227 |
9,765,784 |
|
|
| Net
(decrease) in cash and cash equivalents |
|
(741,583) |
(271,910) |
|
| Cash
and cash equivalents at the beginning of the year |
|
890,434 |
1 162,344 |
|
|
---------- |
---------- |
|
| Cash
and cash equivalents at the end of the year (20) |
|
148,851 |
890,434 |
|
|
|
========== |
========== |
|
|
|
| NOTES
TO THE ACCOUNTS FOR THE |
|
| YEAR
ENDED SEPTEMBER 30, 1999 |
|
|
| 1.
STATUS AND NATURE OF BUSINESS: |
|
|
| The
company was incorporated as a public limited company on June 26, 1970 and is
listed on |
|
| Karachi
and Islamabad Stock Exchanges. The company is engaged in the manufacturing
and sale of |
|
| yarn. |
|
|
| 2.
BASIS FOR PREPARATION OF ACCOUNTS |
|
|
| The
financial statements have been prepared in compliance with the requirements
of International |
|
| Accounting
standards as adopted by The Institute of Chartered Accountants of Pakistan
which are |
|
| applicable
to the Company. |
|
|
| Following
accounting policies have been consistently applied in preparation of
accounts: |
|
|
| 2.1
ACCOUNTING CONVENTION |
|
|
| The
accounts have been prepared under historical cost convention except that
certain fixed assets |
|
| have
been included at revalued amounts. |
|
|
| 2.2
STAFF RETIREMENT BENEFITS |
|
|
| The
company operates defined contributory unfunded gratuity scheme for officers
and employees. |
|
| Provision
for gratuity is made on the basis of last month's drawn slurry for each
completed year of |
|
| service.
Minimum qualifying period for gratuity benefit is one year of service from
date of joining. |
|
| Gratuity
becomes payable on lumpsump basis on the date of retirement or resignation.
The Company |
|
| does
not contribute towards or maintain any pension or provident fund. |
|
|
| 2.3
TAXATION |
|
|
| The
company provides for deferred taxation using liability method on all major
timing differences which |
|
| are
expected to reverse in the foreseeable future. However, provision for
deferred taxation for the |
|
| current
year is not considered necessary due to heavy losses. Deferred taxation on
timing differences |
|
| not
accounted for is due to: |
|
|
|
(Rupees) |
|
| -
accelerated tax depreciation |
|
7,000,814 |
|
| -
carry forward of business losses |
|
(31,990,190) |
|
|
----------- |
|
|
(24,989,376) |
|
|
========== |
|
| In
view of available tax losses, provision for current taxation represents the
minimum tax due under |
|
| Section
80-D of the Income Tax Ordinance, 1979. For the purpose of current taxation,
unassessed |
|
| losses
available for carry forward at September 30,1999 are estimated at Rs
96,939,970 (1998 :Rs. |
|
| 31,855,396). |
|
|
| 2.4
TANGIBLE FIXED ASSETS |
|
|
| OWNED |
|
|
| Operating
fixed assets except freehold land are stated at cost or revalued amounts less
accumulated |
|
| depreciation.
Freehold land is stated at cost or revalued amount and capital work in
progress is stated |
|
| at cost. |
|
|
| Depreciation
is charged on the basis of written down value method whereby cost or revalued
amount |
|
| of
an asset is written off over its useful life without taking into account any
residual value. The full |
|
| annual
rate of depreciation is applied on the cost of additions while no
depreciation is charged on |
|
| assets
disposed off during the year. Minor renewals or replacement, maintenance and
repairs are |
|
| charged
to income as and when incurred. |
|
|
| Major
renewals and repairs are capitalised and the assets so replaced are retired.
Gains or losses on |
|
| disposal
of fixed assets are accounted for as profit or loss for the year. |
|
|
| LEASED |
|
|
| Plant
and machinery and vehicles are stated at amounts computed on the basis of
discounted value of |
|
| total
minimum lease payment and residual value of the asset at the end of lease
period guaranteed, if |
|
| any,
by the company. Financial charges are allocated to accounting period in the
manner so as to |
|
| provide
a constant periodic rate of charge on the outstanding liability under finance
lease agreement. |
|
|
| Depreciation
charge is based on the estimated useful life of asset in view of the
certainty of the |
|
| ownership
of the asset at the end of the lease. |
|
|
| 2.5
STORES, SPARES AND LOOSE TOOLS |
|
|
| These
have been valued using moving average cost. |
|
|
| 2.6
STOCK IN TRADE |
|
|
| Raw
materials are valued at moving average cost. |
|
|
| Work
in process is valued at production cost which includes related portion of
factory wages and |
|
| overheads. |
|
|
| Finished
goods are valued at lower of cost or net realisable value. Net realisable
value signifies |
|
| prevailing
selling price in the ordinary course of business less costs incidental to
sale of goods. |
|
|
| 2.7
INVESTMENTS |
|
|
| These
are valued at cost less taking any permanent devaluation in the market value
thereof. |
|
| Dividends
in cash are accounted as income on receipt basis whereas bonus dividend is
accounted by |
|
| increasing
the number of shares held. |
|
|
| 2.8
REVENUE RECOGNITION |
|
